Garza Company expects to have a cash balance of $46,000 on January 1, 2008. Rele

Question

Garza Company expects to have a cash balance of $46,000 on January 1, 2008.

Relevant monthly budget data for the first 2 months of 2008 are as follows.

Collections from customers: January $85,000, February $150,000.

Payments for direct materials: January $50,000, February $70,000.

Direct labor: January $30,000, February $45,000. Wages are paid in the month they are incurred.

Manufacturing overhead: January $21,000, February $25,000. These costs include depreciation of $1,000 per month. All other overhead costs are paid as incurred.

Selling and administrative expenses: January $15,000, February $20,000. These costs are exclusive of depreciation. They are paid as incurred.

Sales of marketable securities in January are expected to realize $10,000 in cash. Garza Company has a line of credit at a local bank that enables it to borrow up to $25,000. The company wants to maintain a minimum monthly cash balance of $20,000.

Prepare a cash budget for January and February. (List amounts from largest to smallest eg 10, 5, 3, 2. If answer is zero, please enter 0. Do not leave any fields blank.)

GARZA COMPANY
Cash Budget

For the Months Ending February 29, 2008
January February
Beginning cash balance

$


$

Add: Receipts





Total receipts



Total available cash



Less: Disbursements







Total disbursements



Excess (deficiency) of available cash over cash disbursements
Financing





Ending cash balance

$


$

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Explanation / Answer

Garza Company

Cash Budget

For the months of january and February

Garza Company

Cash Budget

For the months of january and February

Details January February Cash balance, beginning $46,000 21,000 Add: Receipts: Collection from customers 85,000 150,000 Sale of securities 10,000 0 Total receipts 95,000 150,000 Total cash available 141,000 171,000 Less:Disbursements Direct materials 50,000 70,000 Direct labor 30,000 45,000 Manufacturing overhead 20,000 24,000 Selling and administrative 15,000 20,000 Total disbursements 115,000 159,000 Excess(deficiency) of available cash over 21,000 12,000 cash disbursements Financing Borrowings 0 8,000 Repayments 0 Ending cash balance 21,000 20,000 Working Manufactring overhead ($21,000-1,000)=$20,000 Manufactring overhead ($25,000-1,000)=$24,000

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